Bankable Insights - Sibos 2021 edition_November 2021
Explore our highlights from Sibos 2021 in this edition of Bankable Insights, along with personal observations from three of our senior leaders.
*Bankable Insights* Sibos 2021 edition
Over the last year the financial industry has championed digital acceleration, managed new risks, embraced transformative technologies and adapted to a steady stream of changes.
Our theme this year, Navigating Change to Forge the Future, reflects how navigating these changes successfully is critical for the future of businesses and our communities.
From spotlight panels to plenary sessions, much content was shared over Sibos 2021. We’ve put together our highlights in this Sibos edition of Bankable Insights and we hope this will spark new ideas and more conversations across pertinent topics from custody to cybersecurity, sustainable supply chains and talent diversity.
Your Sibos journey doesn’t end here – don’t miss our dedicated Sibos Hub, which contains expert insights, client stories and more tips on navigating changes and tapping new opportunities.
Thank you for your continued engagement and support. We hope to see you in person in Amsterdam during Sibos 2022.
Observations from our experts
"Engaging with clients in virtual meeting rooms only reminded us the pace at which the world is going digital and the challenges ahead for Banks in adopting emerging technologies!
Digital transformation and partnerships were top of mind. Clearly, going digital requires choosing a partner carefully – institutional relationships of the future will be fewer and deeper.
Fintechs were another very hot topic! Standard Chartered operates in some of the world’s largest markets where digitisation continues apace and local innovation is thriving. Consequently, there was a lot of interest in our client selection and partnership criteria, control frameworks and overall governance for fintechs.
Looking forward to meeting colleagues in person next time round!"
"Conversations around the different elements of sustainability show just how important we as an industry recognise this topic to be; whether from the financial inclusion perspective, the need for stronger governance or in the assessment of the risk and opportunity of sustainable finance. These are not new conversations but are growing in their priority and we were glad to be able to contribute our experiences, including on Islamic Financing and the synergy with ESG emerging there.
Client engagement is changing. Our discussion on the future of custody in partnership with Bank of New York shared opinion on where we see this moving and how we think data and technology will change our client conversation.
Was great to see everyone virtually and I hope to see you in person next year!"
"Putting clients at the centre was a common theme across the sessions and discussions during this year’s Sibos. This resonated very well with me given our continuous focus on leveraging technology to make banking simpler, safer and more convenient for our clients.
Sibos 2021 was a great platform to share our experience and capabilities in addressing one of the world’s most pressing challenges - sustainability. It was also a chance for us to explore areas of collaboration with our partners and clients, particularly in the areas of trade finance, cash management and digital banking.
I hope the event has inspired you and I look forward to seeing you in person at next year’s event!"
*Navigating change: future-proofing against similar events* The known unknowns: how the world’s snapback from COVID-19 will bring unintended consequences
The known unknowns: how the world’s snapback from COVID-19 will bring unintended consequences
The ripple effects of the pandemic are still expanding across multiple dimensions: political, regulatory, macroeconomic and societal.
Colossal fiscal and policy interventions by governments in response to COVID-19 shifted economies in ways that are now unfolding. Understanding those effects is critical both to envisaging what 2022 and 2023 will look like and navigating the changes that will occur.
At the onset of the pandemic, governments were forced to balance the urgency of stopgap responses to the emergency against the possibility that those responses would have unforeseen and unintended repercussions down the road. With a global recession of unparalleled acuity now in the rear-view mirror, amid an almost equally sharp recovery, attention is turning to exactly what those unintended consequences might be.
Short-term disruption, but also long-term damage
COVID-19 has hit different countries in very different ways, and along different timelines. Countries that were able to put in place generous support for businesses and individuals, and which have rolled out successful vaccination programmes, are springing back more quickly than those that have not, and with less in the way evidence of hysteresis – that is, long-term scarring that can persist after the initial economic shockwave has receded, such as structurally higher unemployment.
Hysteresis combined with record debt levels is a major concern. In and of itself, the rising tide of sovereign debt associated with the pandemic response is not, in our view, an insurmountable problem. But for countries whose productive capacity has been permanently scarred, and who face lower long-term growth as a mechanical outcome of this scarring, debt-to-GDP ratios could easily explode.
Higher debt servicing costs could in turn lead to the worst-affected countries deciding that they can no longer afford to implement important reforms. In addition to building the connecting infrastructure needed for better intra-regional trade, such reforms include de-carbonising their economies, and embracing the digitisation needed to ensure they get the best access to international markets. Postponing those reforms could further suppress long-term growth.
Advanced economies should not assume that such unexpected externalities are limited to frontier and emerging markets. While furlough programmes and other types of income support did much to shield household balance sheets from the pandemic recession, there is some evidence that attitudes towards work itself may have been destabilised by the response to COVID-19.
In the US, the labour participation rate is still lower than it was in February 2020, and the number of long-term unemployed 1.6 million higher1, despite soaring job opportunities2. US workers are also quitting their jobs in record numbers, with 4.3 million waving goodbye to their bosses in August, and retail workers being among the most likely to quit3. This threatens to accentuate the supply-chain disruption notable in fast-recovering economies such as the US and the UK4.
An old playbook for different times
The fiscal response to the pandemic, at least in advanced economies, was clearly in line with the playbook developed in response to the Global Financial Crisis in 2008. In that instance, massive monetary injections to stabilise the financial sector are widely held to have been effective in turning the tide of crisis, amid close cooperation between the G20 group of the world’s largest economies. Whether the “bazooka” aspect of the playbook proves as effective in the 2020s remains to be seen, especially given the widely disparate impact and longevity of the pandemic across geographies.
Meanwhile, the global cooperation seen in 2008 has been in short supply. A cultural megatrend towards nationalism since the GFC has seen many governments loudly championing the needs of their own citizens, rather than responding to those of the wider world. When it comes to vaccines, the World Health Organization has warned that this approach is short-sighted, arguing that these should now be delivered to low-income countries rather than being used to vaccinate low-risk groups in wealthier ones5.
The new nationalism raises questions about how much help developing countries can expect going forward, in terms either of vaccinations or their financing needs, or how much they will be thrown upon their own resources – again, with implications in terms of their reforms and the global transition to a lower-carbon economy. There is also the prospect that if traditional donor nations dial down their assistance, the vacuum could be occupied by newer actors, sharpening the geopolitical contest in emerging and frontier markets.
Prior to the pandemic, there was a general belief that global supply chains, even just-in-time inventories, were extremely resilient. That belief is gone – Black Swans are no longer seen as hypothetical events. In the medium term, corporate and political leaders are going to devote much greater attention to rendering their organisations anti-fragile, even if this creates overlaps and redundancies. Patterns of investment will follow suit.
*Leaning on technology and digitalisation* The future of custody: how data and technology are transforming conversations
The future of custody: how data and technology are transforming conversations
Custodian banks are becoming less like service providers to their customers, and more like strategic partners. While the human element remains key, the topic of conversation is turning to the digital revolution.
For a long time, custody was seen as the boring part of banking. While it is true that scale, safety and stability remain watchwords for the sector, the emergence of entirely new classes of digital assets and systems of transfer means that innovation and custody are now going hand in hand. The transformational implications offer a rebuke to the lazy argument that custody is being downgraded and “commoditised”.
Many intermediaries sit between an investor and an issuer. Ensuring that these intermediaries work together in the speediest and most efficient way possible is one way that custodian banks can offer their clients an improved service, allowing them to feel that they are more closely connected to the markets. This is particularly important for Standard Chartered, given that many of the issuers are in challenging frontier and emerging markets, while many of the investors are sitting in Western nations and expecting the same level of delivery as if they were investing in developed markets.
Five years ago, technology had not developed enough to attempt more ambitious, multi-party collaborations, but today there is a clear technological glidepath to a whole new way of doing business. The main impediment is trust - distributed ledgers appear to be the most logical way of enabling this new mode of doing business, but one institution trusted by all parties needs to “own” the blockchain.
If this can be resolved, the future will arrive very suddenly. No longer will collateral need days to move from one clearing house to another: tokenised digital assets offer the potential to remodel the entire ecosystem around instantaneous transactions, particularly if central (or even commercial) banks start issuing digital currencies that are recognised by financial institutions.
Already, the digital tokenisation of assets is expanding the financial services sector and offering the potential to build bridges between traditional and digital markets and ecosystems. These are uncharted waters, and the rules of the game are still emerging. Custodians need to be nimble in order to navigate this change, and promote a culture of agility and responsiveness within their organisations.
Preserving the human touch
Ultimately, custody and security services remain a people game, based on personal relationships and conversations about how to solve problems and understand requirements. Nowadays, many of these conversations are about digital assets, and there is a sea-change in the kind of people being hired into custody teams, Talent is arriving from fintechs, crypto-specialists and tech giants - people who understand the emerging shape of the new digital landscape and have the skills to navigate these changes.
That is not to say that banks can do everything for themselves. Custody is an implicit part of asset servicing and teaming up with the right partners is crucial, whether they be fintechs or more conventional suppliers. This is not just in the “pipes and plumbing” of asset flows but also in improving digital client servicing and creating integrated experiences that deepen and cement relationships.
When it comes to navigating change, data and analytics are likewise crucial. Data can be looked at in two different ways. Custodian banks sit on powerful quantities of data, and giving clients access to it in a way that is compliant, insightful and most of all easy to access is an important requirement.
A second aspect of data is driving custodian banks’ processes through a data-centric model that allows better connections and interoperability between services across the ecosystem, both the banks’ own services and those from third parties. Again, it comes back to client services - enabling clients with greater predictive power and forging a strategic partnership.
*Leaning on technology and digitalisation* Collaboration in action: how fintechs and banks can grow together
Collaboration in action: how fintechs and banks can grow together
Around the world, customers and businesses are going online to procure goods and services, manage their finances and make payments, presenting growing opportunities for banks and fintechs alike and shining the spotlight on collaboration between the two.
This has accelerated in the past two years as the global pandemic has forced many to embrace digital payments, especially in markets that have historically relied heavily on physical cash. Several leading fintechs have worked closely with their banking partners, building an impressive array of well-regulated, secure and innovative digital financial products, creating new business and investor opportunities.
But things don’t always go as planned and partnerships can throw up some challenges. This particularly happens if the parties involved have different expectations of each other, or if there’s misalignment on the objectives or timelines working up to product launch.
With investments in the fintech industry forecast to grow to USD310 billion by 2022 – up from USD128Bn in 2018, more fintechs are looking to expand their footprint and their offering, and the opportunity to collaborate with banks is set to increase. Here, Standard Chartered’s Anurag Bajaj, Global Head of Fintech, shares his insights into how banks and fintechs can work together in a productive and sustainable way.
Each market is different – get to know it
Growing populations and increasing digital and financial inclusion means many fintech companies are targeting rapid expansion across borders and into more emerging markets of Asia, Africa and the Middle East.
Since regulations on capital, payments, foreign exchange, digital assets and lending vary widely between countries, specialist knowledge of local markets and regulation is necessary in this endeavour.
For some time, Asia has been attracting interest from European and US fintech players, primarily because of the size and growth of its digital-literate population. Against this backdrop, global demand for ecommerce and local payment options is accelerating among consumers and small businesses, now also fuelled by COVID-19 restrictions. In China and India, the usage rates of FinTech powered services1 are well above 80 per cent, and markets like Hong Kong, Singapore and South Korea are catching up, while Southeast Asia is also fast growing with a huge upside from its demographic dividend.
US payment company Stripe2 has also been growing in Southeast Asia and the Middle East, benefiting from explosive growth in ecommerce. YouTrip, a mobile wallet based in Singapore, announced a six-year partnership with Visa3 to accelerate expansion into Malaysia and the Philippines. Consumers and businesses in the Philippines have embraced digital, with fast-growing GCash4 offering payments and frictionless financial services.
Digital payments are also core for Standard Chartered, and the rise of the digital economy is one of the bank’s high-conviction themes. The bank is investing USD1 billion a year in strategic initiatives5 that will help it generate 50 per cent of its income from digital initiatives, innovation and transformation of its core banking technology.
Since Asia Pacific is forecast to exhibit the highest fintech growth of all regions6, we believe our knowledge of these markets, gained through our own rich experience operating in the region, can be leveraged by our Fintech partners to help foster innovation across our operations in individual countries.
An example of Standard Chartered’s ability to help fintechs capitalise on the bank’s local knowledge was its role bringing together Ireland’s CurrencyFair and Australia’s Assembly Payments. The new company, Zai moves beyond domestic and cross-border payments to provide a core suite of broader integrated financial services to mid-market and enterprise-level customers.
Knowing the region as well as the global context is vital. In addition to offering extensive business networks, an “on the ground” presence and local connections, Standard Chartered’s long history and global footprint has helped us understand the importance of localisation. There is no one-size-fits-all approach when it comes to product offerings, local rules and regulations, particularly where innovative Fintech business models and digital technologies are concerned.
For most fintechs entering into a new market today, the growth of instant payments means they must secure direct access to real-time payments infrastructure in these markets, as well as any other local payment methods (like wallets). Driving this is consumer expectation of being able to move money with an increased velocity and transparency. Standard Chartered works with a range of fintechs today to support the solutions they need, and to provide secure connectivity in a compliant manner.
Don’t underestimate the effort, especially local needs
Continued fast-paced growth requires local resourcing, particularly in areas like compliance, marketing and product design. Maintaining competitiveness in this area is difficult, with a shortage of, and high demand for, highly-skilled developers and engineers.
Based on experience of being in many of the markets for an extended period, Standard Chartered brings a very local perspective and can help fintechs build a foothold in a new market or grow into another. While we are an incumbent7 in many markets, we are also prepared to disrupt, fostering innovation internally and partnering with innovators.
Beyond the large number of regional and international fintechs expanding into Asia, another fast-growing market is the Middle East. For example, the Dutch payment company Adyen, recently expanded into the Middle East8 with the growth of ecommerce in this region, and has opened an office in Dubai to run Middle East operations and initially support local payment methods in the United Arab Emirates, Saudi Arabia, and Africa.
Standard Chartered has worked with global payments companies and acquirers to set up their offices in the UAE and assisted their further expansion across the Middle East and Africa.
The bank looks to support its clients within as many of its network markets as it can. In the past, the focus was on more developed markets such as Korea, HK and Singapore – but now it is seeing more and more inquiries for assistance to plug in to the fintech ecosystems in emerging markets such as Indonesia, Nigeria and Philippines.
Draw on established local relationships
Building a lasting banking franchise has required us to build strong relationships with local regulators, along with a compendium of regulatory knowledge and in some markets, contacts that fintechs may find useful to tap into. International banks with long-established local ties and business history can help support direct engagement with local regulators and help drive clarity in local regulations.
Legal frameworks across the region are complex9 and are constantly evolving. Having a partner in place who already has a fine-tuned dialogue with local regulators can really help to ease that path.
The importance of these long-held presences and relationships was embodied by Standard Chartered’s partnership with PCCW, HKT and Ctrip Finance to obtain a virtual bank licence for a new digital bank in Hong Kong. We have also recently supported a large ecommerce marketplace navigate regulations in Singapore related to cross border payments for merchant wallets.
Standard Chartered has also invested in Atome Financial10, which operates Asia’s largest buy-now-pay-later platform, Atome, as well as digital lending platform KreditPintar in Indonesia. The partnership will initially roll out in Indonesia, Malaysia, Singapore and Vietnam and then expand to include digital lending products.
Operationalizing risk controls
Checks and balances to guard against fraud and money laundering are vital as criminals look to insert themselves into any potential weakness within a fintech process and take advantage of the uptick in use of these services.
Banks can help navigate the regulatory landscape when it comes to anti-money laundering and counter-terrorism financing. Experience in a broad range of international payments along with the regulatory expectation can be shared, particularly when it comes to transaction screening and monitoring.
As the pandemic accelerated, trends that were already in train increased, including digitalisation. Fintechs and banks were forced to evolve together at an increased velocity, while also coping with the unprecedented challenges thrown up by COVID-19.
That brought into sharp focus what fintechs really need as they grow: local knowledge, appropriate capacity in control functions and strong relationships coupled with robust checks and balances. Putting this in place at the outset creates space for creativity to thrive, and for the promise of digital payments and a truly digital future to be unlocked.
Through partnerships, deals and collaboration, Standard Chartered will continue to invest in and accelerate our digital offerings, working hand in hand with leading fintech innovators to foster fresh ideas throughout our markets.
When working together works well
Standard Chartered’s investment into Linklogis
Standard Chartered and Linklogis, China’s leading blockchain-enabled supply chain financing platform, formed a joint venture to build a digital trade finance platform headquartered in Singapore – called Olea.
It aims to match institutional investors seeking opportunities in alternative asset classes with businesses requiring supply chain financing.
For Standard Chartered, this creates an opportunity to bring institutional investors alternative asset classes on a reliable and trustworthy platform.
This is an example of how fintechs and banks can best work together, as it marries Standard Chartered’s international trade and risk management expertise − as well as its knowledge of Asia, Africa and the Middle East − with Linklogis’ innovative supply chain technology.
*Managing risk and understanding regulations* Collaborate to regulate
How targeted engagement helps investors access emerging markets
It is easy to underestimate the pace of change in frontier and emerging markets. Barriers to commerce are falling quickly, with many governments in Asia, Africa and the Middle East committed to making life easier for investors, as a means of attracting overseas capital and knowledge. Some even see an opportunity to steal a march on Europe and North America, by embracing smarter regulation and digital finance. Benefits can be seen in markets where local regulators are open to discussions with market participants to help them make this transition.
Lessons from Greater China
When it comes to nimble regulations, frontier and emerging markets can take inspiration from China, Hong Kong and Taiwan, whose regulators long ago realised that when it comes to financial services, success means quickly updating the rules to reflect changing circumstances and technology. This has never been more important than over the past 18 months, as COVID-19 lockdowns presented a stark choice between innovation, on the one hand, and paralysis on the other.
Regulators across Greater China have been open to suggestions for how to adapt the rules to the new environment while reducing network risk.
In Taiwan, for instance, foreign institutional investors seeking to open a brokerage account must submit physical paperwork in order to do so – something made much more difficult by social-distancing and remote-working during the pandemic.
Financial institutions, including Standard Chartered, have been working with the Taiwan Depository & Clearing Corporation to find a better system, one that is more resilient to this kind of disruption. The result is the eSMART system, which will allow securities dealers to digitally handle, transfer, and maintain various book-entry transfer documents via the new platform1. It is hoped that the platform will launch before the end of this year.
Regulators in the region are amenable to easing such pain-points, but first they must know where they are, which is why industry engagement is important. In China, for instance, until recently there were two different regulatory and quota regimes for Qualified Foreign Institutional Investors (QFII) and for RMB Qualified Foreign Institutional Investors (RQFII).
This system complicated the repatriation of profits, hindered trading and created a burdensome amount of documentation. Standard Chartered and other financial institutions made representations to regulators such as the People’s Bank of China, China Securities Regulatory Commission and the State Administration of Foreign Exchange in order to explain how the system could be streamlined to encourage more activity.
China’s regulators listened. In June last year, they published new QFII/RQFII rules to simplify market access and expand the scope for investment. These included more flexible funding arrangements, relaxation of the rules surrounding the repatriation of profits, and the elimination of the quotas2.
This was not only helpful to global banks and our customers but, by making foreign exchange easier, it also furthered the Greater Bay Area concept, the policy to enhance the links between the economies of Hong Kong, Macau and Guangdong, each of which have their own currencies and regulatory regimes. There remains plenty of scope for tighter links in future. For instance, currently, trading between Hong Kong and China via Stock Connect grinds to a halt if there’s a public holiday on either side, and sometimes for days beforehand3.
Standard Chartered is advocating a new system that avoids this downtime, so that investors can react in a timely way to market fluctuations on those days.
Helping higher-barrier markets improve access
Regulators in Greater China understand that they can attract greater investment into their market by working with market participants to create smarter regulations. This realisation has spread to other frontier and emerging markets that may not be associated in investors’ minds with receptive administration and regulation. Standard Chartered works across Asia, the Middle East and Africa, and we are witnessing this transformation firsthand, along with some impressive growth rates.
Take Kenya. There, recent governments have devoted time and energy to improving the business environment, and the results are paying off – the East African nation now ranks above countries such as Italy and Chile in the World Bank’s widely watched Doing Business ratings4. This spirit of reform has extended to financial services, including when it comes to open conversation.
A law in 2019, for example, reduced the threshold of shares that a bidder would need to acquire a company from 90% to 50%. With just half the equity, the new owner would be able to buy-out the minority shareholders on a mandatory basis and then de-list the company from the Nairobi Stock Exchange.
Given that the Doing Business index includes the protection of minority shareholders as one of its key metrics, having such a low threshold was likely to have a negative effect on Kenya’s ranking, which Kenya’s national assembly is keen to improve still further5.
Leading Kenyan and international banks, including Standard Chartered, lobbied the government to revise the legislation, and in February 2020 the 90% threshold was restored6.
Indonesia is another country often perceived as presenting high barriers to entry, an impression compounded over the past year by the disruption caused by the pandemic. There, Standard Chartered, together with custodian bank association ABKI, has worked with the Indonesia Central Securities Depository (KSEI) to expedite the launch of the eASY.KSEI platform, to help mitigate the disruption of COVID-19. The platform allows investors to attend general meetings of shareholders virtually, where previously physical attendance was required, and it includes an e-Voting and e-Proxy system.
eASY.KSEI went live on 20 April 2020. Its advantages go beyond social distancing: being an archipelago of five main islands and thousands of smaller ones, travelling around Indonesia can be challenging, so digital solutions make sense.
The same is true of the Philippines: there, the central bank, the Securities and Exchange Commission and the Philippine Depository & Trust Corp have permitted the electronic submission of reports and documents during the community quarantine, and have accepted digital signatures. Standard Chartered is working to persuade them and government departments such as the Bureau of the Treasury and Bureau of Internal Revenue to make these changes permanent, in order to unlock the efficiency-gains of digital processes.
Sharing experience through engagement
This kind of engagement should not be seen so much as lobbying as the sharing of experience. By sharing what we’ve learnt from working not only in their domestic markets but in many others, Standard Chartered can engage regulators on the developments and changes that would drive greater market participation.
This collaborative approach also allows us to help our own clients reduce their risks from operating in such markets. That in turn makes frontier and emerging markets more attractive to investors, expediting their national growth and strengthening their resilience to external shocks.
*Managing risk and understanding regulations* How cybersecurity can be an opportunity to build trust in the post-pandemic era
How cybersecurity can be an opportunity to build trust in the post-pandemic era
Why investing in proactive cybersecurity will pay dividends for banks and fintechs
No longer occupied by the need to hunker down and safeguard their systems in a period of disruption, now is the time for banks and fintechs to take a proactive approach to cybersecurity.
While the pandemic increased the time we all spend online and expanded the proportion of our lives that we could run from our phones, it forced many businesses to be reactive in terms of their systems and cybersecurity. Now, as the world moves into a new reality, there’s an opportunity to rebase, and to enter a proactive phase in the continuous battle against cybercrime.
Let’s start looking ahead again. Attackers seem to be using new techniques for new types of vulnerabilities, and you don’t know until they’re discovered that they’ve been exploited by an attacker for months. We’ve had a period now, because of the social upheaval from COVID, where we’ve been trying to play catch-up.
Director of Cyber-Financial Intelligence (CyFI),
The pandemic increased the attack surface available to cybercrime by forcing more people online and accelerating business adoption of fintech technology.
This created yet more opportunities for cybercriminals, who are always agile, and left a huge number of organisations playing catch up – migrating online and trying to backfill controls. It also laid bare the deficiencies of many cyber toolboxes and underscored the strengths of others – opening up a gap between those organisations that were ready to tackle advanced cyber-related criminal activity, and those that weren’t.
An acceleration in cybercrimes
As people around the world took to the internet to work, shop, bank and connect with others, demand for internet access soared along with global data consumption. Some telcos carried as much as 60 per cent more data on their networks than they did before the crisis, a PwC report1 revealed. According to KnowBe4, a security awareness provider, email attacks related to the coronavirus were up 600 per cent during the quarter that ended March 30, 2020.
Banking and financial institutes are 300 times more at risk of cyberattack2 than other companies, research from Boston Consulting Group found. At the same time, it is a sector with high digital penetration: 96 per cent of 27,000 consumers surveyed in 27 global markets3 were aware of a fintech transfer or payments service, and three-quarters had used one, EY’s most recent fintech adoption trends survey shows.
And many of those organisations weren’t ready for the rapid increase in digital uptake, giving cyberattackers a first-mover advantage that they quickly capitalised on.
That left many ill-prepared, with COVID-19 uncovering shortcomings in the digital capabilities of almost 80 per cent of the institutions surveyed by Deloitte4. Nearly all of the 200 senior banking and capital markets executives that responded said their institutions are already implementing or planning to accelerate digital transformation of services to maintain operational resilience over the next six to twelve months.
It’s been very reactive. The pandemic created a period where there has been a lot of implementation followed by remediation and that’s storing up a longer-term problem. From a cyber-financial intelligence perspective, the focus now needs to be on how best to deter future attacks and on anticipating what’s coming next.
Director of Cyber-Financial Intelligence (CyFI),
Banking, finance and fintech shoulder a huge responsibility as gatekeepers and guardians of trust, Mr. Munro says, since everyone has an expectation that they will be able to bank online securely, while criminals are constantly looking to insert themselves into the chain.
Additionally, there’s a tension between introducing new functionalities at a rapid pace to meet consumer demand, and embedding the right checks, controls and balances. Regulators want to see innovative products that have inbuilt capability to anticipate and thwart cyber threats.
To help address this, at Standard Chartered we set up our Cyber Financial Intelligence Unit (CyFI) to guard against abuse of the financial system. Going beyond a cyber-threat intelligence function, this unit builds cyber toolboxes that are crucial for tackling advanced cyber-related criminal activity.
It pairs technologies such as blockchain with traditional techniques for tracking criminals – including information sharing, collaboration and following the money – and highlights how combining the two approaches is imperative for success. In this way, CyFI plays a proactive role in identifying, mitigating and disrupting financial crime.
Taking charge of cybersecurity requires buy-in from the board down. Embedding awareness throughout the organisation is paramount and is, in part, about instilling the idea that it’s not just a responsibility for the IT team, but for every employee.
In the same way, customers should be seen as an extension of your organisation and should be educated and supported too.
“The pandemic exposed where businesses hadn’t embedded security measures or been able to bring together expertise from across their organisation to consider cyber as more than just a technical issue,” says Mr. Munro. “That underlines how important it is for cyber to be part of the culture and for this to come from the board down.”
Expanding our practices, Standard Chartered developed a cross-functional working group during the pandemic to explore the end-to-end cyber issues and support clients. We continue to invest in our information and cybersecurity capabilities, strengthening them to meet the additional requirements brought by COVID-19.
It’s important not to depend on technology or the latest tooling alone; the basics are a core building block, such as critical security controls and a culture of shared responsibility.
With cybercriminals becoming increasingly sophisticated there is no room for complacency. All organisations should be constantly identifying potential holes in their security and working out how to plug them.
Wargaming can be an effective approach but it’s important to look beyond technical teams. Employees in security-critical positions should know who to contact – and how to make contact – if systems are compromised. It’s also important to include customers and clients in cyber crisis planning, putting processes in place for them to access their money in times of disruption.
The human is an important element and is still often overlooked. Technical controls don’t have all the answers and there is a lot of education with clients needed to build an end-to-end response.
Fintechs have a unique opportunity to embed cybersecurity and create this culture, because they are building things from the ground up. Anonymised sharing of data and effective use of technical indicators can help uncover a potential attacker’s reconnaissance activity and prevent an attack before it even begins.
Trust is so important for any company. So fintechs, and all companies, should see cybersecurity as an opportunity to earn trust, strengthen customer relationships and build brand reputation. Don’t look for the lowest minimum standard; in the long term those that invest in it and aspire to the highest standards will be the most successful.
Director of Cyber-Financial Intelligence (CyFI),
*Making a sustainable impact* Supply chains and sustainability: tackling the challenges of visibility and decarbonisation
Supply chains and sustainability: tackling the challenges of visibility and decarbonisation
Preventing supply chains from fracturing as a result of further twists in the COVID-19 pandemic is a short-term goal, but further into the future, decarbonisation is the priority. These are complex challenges – where does one start?
The crisis of the past 18 months has prompted many organisations to re-evaluate their operations.
Sustainability has become a watchword, both in the short and long term. Preventing supply chains from fracturing as a result of further twists in the COVID-19 pandemic is a short-term goal, but further into the future, decarbonisation is the priority. These are complex challenges – where does one start?
The problem of supply-chain visibility
Many large companies are discovering that they don’t know their supply chains as well as they need to. Sometimes, the scale of the risk only becomes apparent when the supply chain grinds to a halt. Shortages of raw materials and shipping containers, disruption caused by extreme weather events, and the two-week closure in August of the Chinese port of Ningbo due to a COVID outbreak have left shelves unstocked and quarterly profits affected, in the Asia-Pacific and elsewhere1,2.
Moreover, many of the issues occur not with direct suppliers, but with deep-tier suppliers, often small and medium sized enterprises (SMEs). Such SMEs often struggle to arrange the low-cost, timely supply-chain finance they require to cover the costs of their own inputs and inventory, and to bridge the time it takes for buyers to settle their invoices3. The volatility of input prices in the pandemic has accentuated their difficulties in this regard.
The financial services industry has been hard at work trying to help the ecosystem mitigate some of these issues. One promising avenue is blockchain. Blockchain can be used to create a ledger that is shared between many parties, far and wide. When one ledger-holder makes a transaction, everyone else’s ledger updates to record it, using the automatic online exchange of cryptographic keys and signatures. This ensures that all the ledgers remain identical. Blockchain therefore offers a highly efficient means of creating trust through transparency.
This trust can form the basis of credit-approvals. It was this idea that inspired a group of leading Asia-Pacific banks, Standard Chartered among them, to invest in the Contour Network in 2018. Contour replaces paperwork-based Letters of Credit with a blockchain-based equivalent, resulting in a highly automated system that can trim days off export processing times4. Given the extent of the turmoil currently facing global supply chains, such efficiency has never been more valuable.
Standard Chartered also has partnerships with blockchain-powered platforms such as Linklogis and Trusple to further improve transparency across supply chains, increase visibility and simplify trade.
Blockchain is not the only way that can help tackle the lack of visibility and resilience in supply chains.
Standard Chartered’s Supply Chain Performance Indicator asks respondents a series of questions, and then compares their answers to those of peer organisations across or outside the region they are based in. Respondents then receive tailored recommendations of best practices to help them improve their supply chain resilience.
Global Head of Trade and Working Capital,
One overall finding is that the tool shows a gap between the importance companies place on supply-chain resilience – 90% describe it as a strategic imperative – and the relatively low confidence they have in their resilience at the present moment5.
Decarbonising the supply chain
The lack of visibility over supply chains is further compounded by a need to meet demands for decarbonisation. Scope 3 of the Paris climate change agreement holds companies accountable not only for their own direct emissions, but for emissions throughout their entire value-chain, from the goods they purchase to the end-disposal of the products they sell6.
The impact is being felt, and the industry is starting to see changes in corporate behaviour. According to Standard Chartered’s research, seventy-eight percent of multinational corporations surveyed say that they will start to remove suppliers who are slow to decarbonise by 2025 – 15% say they have already begun this process7.
By the same token, almost half of multinationals (47%) are offering preferred-supplier status to sustainable vendors, with almost one-third (30%) offering preferential pricing. Financial institutions are supporting this: Standard Chartered has pledged to fund and facilitate USD75-billion worth of investment in sustainable infrastructure and renewable energy by the end of 20248.
This kind of partnership between financial institutions, big corporates and their deep-tier suppliers helps to close a transparent, trust-based loop that promises benefits for all stakeholders.
Global Head of Trade and Working Capital,
Smaller firms can access credit in a timely, cost-effective way – particularly if they are green businesses that are making a bona-fide contribution to decarbonisation – while their larger customers can comply with their ESG requirements and strengthen the resilience of their supply chains, and investors can tap an alternative asset class.
The events of recent years have shown the importance of this kind of mutually beneficial arrangement in ensuring supply chains are secure and sustainable, both in the short and long terms.
Because while the pandemic has shown the risks of the old way of doing business, responses to it have also helped demonstrate the benefits of a sustainable, digitally enabled future. For companies trying to tackle these challenges, tapping the resources provided by their financial institution partners is one way to start.
*Making a sustainable impact* Challenges, realities and opportunities in Sustainability and ESG
Challenges, realities and opportunities in Sustainability and ESG
When it comes to navigating change, the journey towards sustainability and ESG (environmental, social and corporate governance) can be a challenge.
Instead of facing it on their own, some corporations work together with like-minded partners to leverage mutual strengths towards a common goal.
One such example is the partnership between Standard Chartered and ENGIE South East Asia (ENGIE), working together to tackle the challenges associated with re-engineering businesses and economies in the transition to net zero.
Kai Fehr, Global Head of Trade and Working Capital at Standard Chartered and Jared Chng, Regional CFO at ENGIE South East Asia discuss the challenges, realities, and opportunities in sustainability and ESG.
No greener energy than energy that is saved
ENGIE sees its corporate purpose as to accelerate the transition towards carbon neutrality. It does this through helping customers – both businesses and governments - invest in the right systems to reduce energy consumption and maximise energy efficiency, in addition to ensuring its own portfolio is carbon-neutral.
It recognises that different businesses and governments face different challenges - there’s no one-size-fits-all approach. ENGIE’s unique “as a service” approach offers accessibility through integrated, tailor-made, and co-financed solutions.
For instance, Singapore has limitations when it comes to green power. It lacks the wind or geothermal energy that is powering the green revolution in countries such as the UK and Indonesia. Solar is viable, but its footprint is constrained by Singapore’s relatively small physical size.
That means Singapore needs to focus on the biggest opportunity: energy conservation. There is no greener energy than energy that is saved, and ENGIE helps its clients do exactly that. It works on energy efficiency for its clients’ utility systems, often for large industrial concerns, taking on the full asset life-cycle and allowing them to focus on their own core manufacturing process while outsourcing their utilities, long-term and with an energy-efficiency guarantee.
Standard Chartered has many conversations with clients about sustainability. They tend to cohere at the same point: how to bring the physical supply chain in line with the financial supply chain, with sustainability considerations applying to both.
This is another area where the partnership with ENGIE offers a valuable example of best practice. Standard Chartered has partnered with ENGIE to work together on projects through offering the latter sustainable trade finance solutions developed in accordance with the Bank’s Green and Sustainable Product Framework, which sets out eligible qualifying themes and activities mapped against relevant United Nations Sustainable Development Goals. The transparency in this approach is the key ingredient to avoiding grey areas and ambiguities that can lead to awkward questions about “greenwashing”.
Tapping on specialist organisations
A larger question for banks comes in relation to services such as trade financing, where the volume of transactions is very high – Standard Chartered processes several million a year. Hence, defining a framework around sustainable goods, suppliers and end uses is critical to the Bank.
So too is understanding that even with strong sustainability teams internally – it has a dedicated Sustainable Finance team offering expertise in managing ESG risk as well as spotting opportunities and structuring solutions to drive positive impact financing - a bank cannot do everything itself.
Standard Chartered’s approach has been to collaborate with external certifying bodies who specialise in ESG and corporate governance research, such as Sustainalytics, to set out what qualifies as ‘sustainable’ and ‘green’ products. Furthermore, the Bank sets and regularly reviews environmental & social (E&S) standards for clients via a series of public Position Statements which contains the minimum standards and financing criteria covering five sectors that have a high potential environmental or social impact.
With a Framework informed by years of combined experience in sustainable finance and ESG of the Bank and Sustainalytics teams, clients can expect transparency and a strong commitment when working with Standard Chartered on their journey towards sustainability and ESG.
*Accelerating female financial talent* Essential elements to improving diversity
Essential elements to improving diversity
Advocacy, mentorship and opportunities are elements identified by rising female leaders as being essential to improving diversity.
As the Sibos Talent Accelerator Route (STAR) scholarship1 enters its third year, the programme continues to promote and support inclusion within the industry while bolstering the next generation of female leaders.
The need for balance, networking opportunities and role models are considered essential pieces of the puzzle. Here, two Standard Chartered STAR alumni share their key takeaways and discuss what’s needed to maintain momentum.
The role played by public support and recommendation was seen as paramount for tomorrow’s leaders, and something that has improved greatly in recent years, the STAR scholars say. Advocates within an organisation actively work to promote women and recommend them for projects or roles.
“There is a greater kind of advocacy going on and a lot of that was made possible by the women that came before me,” says Mona Tan, Sustainable Finance Banker for ASEAN and South Asia at Standard Chartered and the Bank’s STAR scholar in 2020. “In the short span of five years since I started professionally, I am seeing real, incremental impact from mentorship and community-building, as well as growth in initiatives enabling diversity and inclusion in the workplace.”
Female and male mentors in the industry can help promote and retain talent by supporting development and guiding progression. Mentorship can also support the building of talent pipelines to access students who may be excluded from traditional recruitment.
It is important as a sounding board for all things, professionally and personally. Mentors can help push women to explore opportunities outside their comfort zones, and simply get comfortable with being uncomfortable.
Sustainable Finance Banker for ASEAN and South Asia, Standard Chartered
While mentorship and sponsorship2 are critical to employee retention and satisfaction, according to the Harvard Business Review, the part they play has been complicated by the pandemic, which forced many people to connect remotely.
Remote mentoring has a role to promote equity and build relationships without the limiting factor of geographic proximity, the HBR says. Training people to use technology to build connections will be a key aspect of fostering this important skill as the pandemic subsides.
Stepping forward for bigger opportunities is an important part of what will define the next generation of female leaders, according to the STAR participants.
Organisations need to ensure there are enough rungs on the ladder to help women to climb into management positions3, Leanne Kemp, the Chief Executive Officer of Everledger, told the World Economic Forum. And it is for the benefit of all, since companies with an inclusive culture are six times more likely to be innovative, according to Deloitte4.
And it’s up to women to define what they want, says Ibiyemi Okuneye, Head of Trade and Transaction Banking for Nigeria & West Africa at Standard Chartered.
Earlier in my career, I had the tendency to focus on working hard without consciously looking out for progression opportunities. I had to learn to put up my hands for newer and bigger opportunities, emphasising my strengths rather than what I would need to learn along the way. I would say to younger female talents, ensure that you always outline what success looks like in your current role and actively define the progression opportunities.
Head of Trade and Transaction Banking for Nigeria & West Africa,
Choosing an institution that supports women in achieving their life goals alongside their career goals is also important, the STAR scholars believe.
Specifically, this means policies that support women with adequate maternity leave, childcare policies, flexible working and returnships – without limiting career advancement.
“Working at an institution like Standard Chartered provides a platform for such balance,” says Ms. Okuneye. “I have taken on a much bigger role to lead the Transaction Banking business in Nigeria and West Africa, in spite of increased family demands. Institutions should provide an enabling environment for female talents to thrive regardless of life or family responsibilities.”
The STAR programme offers a ready-made network around the world, as well as access to the Sibos conference. While the conference is now based around a week of virtual events, it offers a high level of interaction and builds a pool of upcoming talent.
“The STAR scholar programme provides a strong network of mentors and peers from different financial institutions across the globe,” says Ms. Okuneye. “I still maintain very good connections with some of my mentors and fellow STAR scholars. My cohort has kept the lines of communication and continues to share ideas and perspectives on careers and on life in general.”
Seeing women in senior positions is also important, with research showing that having role models5 helps women to overcome the barriers they often face in the workplace.
“It is imperative for younger female talents to be able to see worthy examples of female executives who surmounted challenges, and overcame stereotypes and self-limiting beliefs that have hindered many from attaining senior leadership,” says Ms. Okuneye.
To support women in the workplace and foster diversity, Standard Chartered is committed to building a diverse pool of future-ready leadership talent with senior leadership targets. Participating in the STAR scholarship underscores the Bank’s belief that diversity is a competitive advantage and that its staff should reflect the diverse markets in which it operates.
Shortly after participating in the STAR programme, the careers of these two alumni are going from strength to strength: Ms. Okuneye heads up transactional banking in her region and Ms. Tan has shifted her focus to sustainable finance.
“In this new environment, where a lot of people are choosing to work from home, it is important to keep the community virtually engaged and conversations flowing,” says Ms. Tan. “Metrics become more important, to ensure we are getting mentorship, diversity and inclusion, and career conversations to everyone who wants to make a difference.”